THE VEBLEN EFFECT

Developed by an American economist, Thorstein Veblen stating that in some cases, the effect of increasing the price will result in the increase of demand and vice versa (Bernheim and Bagwell, 1996). This law opposes the supply and demand law (common buying behaviour). The Veblen Effect only apply for luxury product or services (known as Veblen goods) for example, art, cars, jewellery, antiques, fine wines etc.

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The underlying cause of Veblen effect can be differentiated into 3 reasons:

  •     The belief that higher prices mean higher quality.
  •     Pecuniary Emulation: The desire to be seen belonging to the upper class.
  •     Invidious Emulation: The desire to be seen not belonging to the lower classes.

Such effect only works if the marketed product or services have strong association with status, visible, stand out to people, has the unique quality which differentiates them from the competitors or substitutes (brand or product).

This explains why some brands like Rolex, Hermes and Christian Louboutin etc have high demand despite the price that they charge.

The main reason why people purchase Veblen goods is that it shows one’s status, income or wealth. People wanted to be perceived as belonging to the upper class, it gives the person a sense of pride that he/she is able to afford such exclusive where a lot of people couldn’t afford to pay.

For example, if you are a highly paid CEO of a particular multinational company. You needed a watch and was ask to chose either $150 Seiko watch or $10,000 Rolex watch. Both watches functions the same but were priced very differently. Still, the majority will choose Rolex because firstly, they can afford it, also the brand is associated with the premium quality and exclusiveness that reflects their social status and income (Pecuniary Emulation; the desire to be seen belonging to the upper class).

 


References:

Leal Rodriguez, A. (2012). What is the Veblen effect?. [online] WeLearnToday. Available at: http://welearntoday.com/what-is-the-veblen-effect/ [Accessed 13 Jun. 2017].

Bernheim, B. and Bagwell, L. (1996). Veblen effects in a theory of conspicuous consumption. The American Economic Review, 86(3), p.349.

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ONLINE SHOPPING TYPOLOGIES

Due to the unprecedented growth of Internet retailing trend resulting the importance to understand online shopping typologies as it helps to identify the factors that differentiate the online participants. By understanding the nature of the users or consumers, marketers will have fundamental knowledge that helps to track and predict internet retailing trends and structure. Eventually, marketers will obtain a competitive advantage that distinguishes them from their competitors.

According to (Rohm and Swaminathan, 2004), the study of online shopping typologies were analyzed based on the different motives that the online participants have when shopping online, which constitutes of online convenience, variety seeking, information use in planning and shopping, physical store orientation (social interaction and immediate possession of purchased goods). The result of the analysis suggested 4 types of shopper labelled as convenience shoppers, store-oriented shoppers, balanced buyers and variety seekers.

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“The convenience shopper”, this particular shoppers’ main motivation of shopping online is the convenience, other factors such as the prospect of social interaction, immediate possession of purchased goods and varieties were not their main concern. Result from research as shown in Table 3 above obtained from an article by  (Rohm and Swaminathan, 2004) show that from a sample of online grocery that is analysed, the convenience shopper only weighs 11%.

“Store Oriented shopper” weighing at 15% out of the total sample, favour on the importance of physical store orientation (they have high desire to possess the goods immediately and expect social interaction), care less of online shopping “convenience” and variety of product followed by a low tendency for planned purchases.

“Balanced buyers” comprises of 33% out of the sample, this group is moderately motivated by the convenience of online shopping, a low tendency of planned shopping task or information seeking, moderately motivated by the prospect of physical store orientation and the variety of products, services and brands.

“Variety seeker”, weighing at 41% of the sample making it the largest segment, the behaviour of variety seeking dominates compare to the other prospects like the importance of convenient online shopping, tendency to plan shopping trips and purchases followed by physical store orientation, as shown in above, the importance of other 3 prospects were all moderate.

(ASOS, 2017)

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With such knowledge base obtained from the research of online shopping, marketers can take advantage by designing an e-retailer that serve all the needs or motives of online participants to promote sales. An example of successful e-retailer that operates globally is ASOS.

ASOS is a British online fashion and beauty store that allow consumers to shop over 850 brands and also ASOS brand with free delivery service all over the world (ASOS, 2017). The e-retailer listed 60,000 products on the website and apps (available for download in PlayStore and AppStore).

As seen from the website and app, ASOS seems to meet all the 4 different motives that drive online shopping.

High level of convenience because ASOS e-retailer can be accessed through the website for PC users or mobile app, with hundreds of brand and thousands of product available, the customer can browse and do shopping whenever and wherever they like. Moreover, they have a pleasant design website and app that functions really well, this made browsing process easier and smooth for users.

Customers can first “Like” the items that they have an interest in. It will later end up as a list of saved items, customers then can add the items to chart when there are about to made payment. The item will be delivered to the address registered (This is very suitable for university life because students are usually busy with assignments and exams). Hence, customers do not have to go to outlets and be physically there to do shopping, they can do it anywhere and anytime at their convenience.

As mentioned above, 850 brands with 60,000 products are available online in the website and application. Hence, ASOS is suitable for people who seeks a variety of products.

Physical Store Orientation (social interaction and immediate possession of purchased goods):

One of the disadvantages of shopping online is that buyer don’t get to see experience social interaction with the seller and will have to wait for the product to be shipped which will take up days or maybe weeks. In order to tackle this weakness, ASOS provide express shipping so the delivery date will only take up 2 or 3 days but buyer will need to pay extra. Secondly, ASOS offer discounts ranging from 15% – 70%. Hence, people will want to reconsider purchasing from physical outlets for the same or substitutes product because it is much cheaper to shop online, this strategy helps to compensate the weakness of ASOS e-retailing.

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The website and apps are also very useful for customers that usually do research and plan their shopping beforehand because of the provide a complete product information with pictures, 360-degree view and a short video. (Product details: Price, colour, size with detailed measurements, brand, fabric material used and etc as seen in the picture beside).

(ASOS, 2017)


Reference:

Rohm, A. and Swaminathan, V. (2004). A typology of online shoppers based on shopping motivations. Journal of Business Research, [online] 57(7), pp.748-757. Available at: http://ey9ff7jb6l.search.serialssolutions.com.ezproxy.uow.edu.au/?genre=article&ID=doi:10.1016/S0148-2963(02)00351-X&issn=01482963&title=Journal%20of%20Business%20Research&volume=57&issue=7&date=20040101&atitle=A%20typology%20of%20online%20shoppers%20based%20on%20shopping%20motivations&spage=748&pages=748-757&sid=EBSCO:ScienceDirect&au=Rohm,%20Andrew%20J [Accessed 10 Jun. 2017].

ASOS (n.d.). Asos has a tabbed box detailing shipping and returns info right on the product page. [image] Available at: http://www.hyperink.com/The-Ultimate-Guide-To-Increasing-Ecommerce-Conversion-Rates-b7AF769A246a16 [Accessed 15 Jun. 2017].

ASOS. (2017). Women’s Clothes | Shop for Women’s Fashion | ASOS. [online] Available at: http://www.asos.com/women/?channelref=paid+search&affid=10716&ppcadref=137756290%7C8419671370%7Ckwd-6719232088&gclid=CjwKEAjw7J3KBRCxv93Q3KSukXQSJADzFzVSdyNR5pUgHBLbpvE_qDSG8gn4T2O6hyapcu0aqk9bDhoCRt7w_wcB&gclsrc=aw.ds [Accessed 15 Jun. 2017].

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